The 21st Century Currency: What It is & What Are The Legal Ramifications For The Businesses Willing To Accept It

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Bitcoin, also known as cryptocurrency, has become a popular way of transaction. It’s mainly an online-based currency with its own entity. Unlike many dollar-based wallet systems put forward by the banks, bitcoin is a currency in itself.

Bitcoin has become very popular now with it’s the enviable dollar to bitcoin ratio. Many online shops and services have started to accept bitcoin as a form of payment. With its high value, it has now become a powerful asset for investment.

With this uprising of bitcoin, many people are interested in bitcoin, and businesses want to know about the effects of bitcoin transactions on their e-commerce. This article intends to let you know more about the concept of bitcoin and how it could affect your business transactions.

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What is bitcoin

Bitcoin is an online currency. Meaning it is used to make transactions online. Bitcoin has no physical presence or value. It’s value come from, where every currency’s values come from- through people’s belief. When everyone can attain value to it and accept that value for transaction purposes, that is when currency becomes active.

Bitcoin first started to circulate in the late 2000s. A person (or a group) named Satoshi Nakamoto first built this currency. It uses cryptographic methods for transactions, which is why it is called cryptocurrencies.

Bitcoin uses double key encryption. The ‘public key’ is a number like the social security number representing you in the community. Even though anonymity is an essential aspect of bitcoin, the transactions you make can be traced using your public key. It constitutes the bitcoin policy of clean transactions. It is open for all transaction knowledge to ensure accountability.

The ‘private key’ associated with the public key is the one you use for transactions. This private key is your personal number and for your eyes only. This way, the transactions are safe, but knowledge of the trade is made public.

Both of these public and private keys are huge numbers that are impossible to keep in memory, which is why people use a software called ‘wallets’ for bitcoin transactions. This software can be accessed using your computer or mobile phone, and they keep track of your keys and currencies.

In the bigger picture, the bitcoin ecology is called a blockchain, a database that can authenticate the transactions or validity of a bitcoin. This massive database is stored and operated by some independent operators. These people are called ‘miners.’ They are rewarded a certain amount of bitcoin for their service, and this is how bitcoin is supplied or created in the money market.

When a person makes a transaction via bitcoin using his key, his request to transfer ownership is registered in the blockchain database. After which the operators or as we call them- miners authenticate the request by performing exact calculations required. If the request is verified, the ownership is transferred to the new owner. You need to keep in mind- this whole process is irreversible.

Another exciting aspect of bitcoin is the transactional value, which makes it the most appealing currency. One bitcoin is now valued at 11,469.19 dollars at the of writing this article. Because of such high value, it is sometimes called the crypto gold. But the value fluctuates tremendously and very often. As recently as July 23rd, the value was recorded at 9,613 dollars. While it’s a good investment, it’s undoubtedly a volatile one. The same goes for business transactions.

Licensing and registrations process for businesses interested in bitcoin transactions

As it stands, bitcoin is an open currency. It’s not recognized by the U.S.A. or any other country as a formal mode of transaction. According to the U.S. law businesses are bound to register if they are using currencies approved by federal agencies. By this proclamation, a company using bitcoin does not have to register or produce a license officially. However, there are some legal issues.

On the federal level in the U.S.A., there is an act called the Bank Secrecy Act or B.S.A. for short. B.S.A. categorizes some businesses as Money Services Business or M.B.S. To be an M.B.S., and a company needs to provide specific financial services such as- giving traveler’s cheque, money orders, or other services. The organization that enforces this law is called Crimes Enforcement network or FinCen in short.

According to B.S.A., any transmission of currency is such a phenomenon that requires a proper currency or substitute for a currency to be acquired by one person from another person. According to federal laws, the appropriate currency is the U.S.D. or currencies issued by any foreign central bank. In this sense, Bitcoin is not a currency. However, when the bitcoins are used for transactions for goods and services or simply transferred from one person to another, it can be dubbed as a substitute for currency.

One thing is clear: on the federal level, FinCen does not give bitcoin the respect of formal currency. But the curious nature of laws means that bitcoin holds value and can be defined as a cash substitute, which brings up the necessity to control and regulate the transactions of bitcoin. Various states within the U.S. have argued that bitcoin transactions are becoming unavoidable day by day. Issues such as taxation and customer rights protection are coming forward.

To check this problem, after long debates and discussions, FinCen has agreed to widen the scope of the money transmitter categories, which we discussed earlier as the law that gives M.B.S. status to businesses. Now businesses using bitcoins require money transmitter licenses for crypto. By this law, bitcoin transaction has now somewhat brought under federal control.

With the volatile nature of the bitcoin and laws surrounding it, it has become clear that there will be updated versions of the statutes. Most undoubtedly, new laws to regulate bitcoin transitions are why businesses willing to do transactions via bitcoin need to keep up to date with the change of the law regarding bitcoins.